Business Practices in Small Firms in Developing Countries

David McKenzie and Christopher Woodruff

No 21505, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Management has a large effect on the productivity of large firms. But does management matter in micro and small firms, where the majority of the labor force in developing countries works? We develop 26 questions that measure business practices in marketing, stock-keeping, record-keeping, and financial planning. These questions have been administered in surveys in Bangladesh, Chile, Ghana, Kenya, Mexico, Nigeria and Sri Lanka. We show that variation in business practices explains as much of the variation in outcomes – sales, profits and labor productivity and TFP – in microenterprises as in larger enterprises. Panel data from three countries indicate that better business practices predict higher survival rates and faster sales growth. The effect of business practices is robust to including numerous measures of the owner’s human capital. We find that owners with higher human capital, children of entrepreneurs, and firms with employees employ better business practices. Competition has less robust effects.

JEL-codes: L26 M20 O12 (search for similar items in EconPapers)
Date: 2015-08
New Economics Papers: this item is included in nep-bec, nep-cse, nep-ent, nep-hrm, nep-mfd and nep-sbm
Note: DEV PR
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (27)

Published as David McKenzie & Christopher Woodruff, 2017. "Business Practices in Small Firms in Developing Countries," Management Science, vol 63(9), pages 2967-2981.

Downloads: (external link)
http://www.nber.org/papers/w21505.pdf (application/pdf)

Related works:
Journal Article: Business Practices in Small Firms in Developing Countries (2017)
Working Paper: Business Practices in Small Firms in Developing Countries (2016)
Working Paper: Business Practices in Small Firms in Developing Countries (2016)
Working Paper: Business Practices in Small Firms in Developing Countries (2016)
Working Paper: Business practices in small firms in developing countries (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:21505

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w21505

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().